Cheesecake Factory settles with SEC over misleading COVID-19 disclosures

Cheesecake Factory settles with SEC over misleading COVID-19 disclosures
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The Cheesecake Factory has settled charges filed by the Securities and Exchange Commission (SEC) over misleading disclosures about the impact of the COVID-19 pandemic on its business.

The case marks the first time the SEC has charged a public company with misleading investors about the financial impacts of the pandemic, the agency said in a statement. The restaurant chain, without admitting the findings in the SEC order, will pay a $125,000 fine and cease and desist from further alleged violations.

The SEC said Cheesecake Factory filings from March 23 and April 3 were “materially false and misleading" for saying its restaurants were “operating sustainably” during the pandemic, whereas internal documents showed the company was losing $6 million in cash per week, and that it projected that it had only 16 weeks of cash remaining.


The company did not disclose the internal information in the SEC filings, but shared it with potential private equity investors or lenders in connection with an effort to seek additional liquidity, the SEC said.

The restaurant chain received a $200 million investment from private equity firm Roark Capital later in April, according to CNBC.

The Cheesecake Factory also failed to disclose in its March 23 filing that it had informed its landlords that it would not pay rent in April due to the impacts of the pandemic on its business, according to the SEC.

"As our local and national response to the pandemic evolves, it is important that issuers continue their proactive, principles-based approach to disclosure, tailoring these disclosures to the firm and industry-specific effects of the pandemic on their business and operations,” SEC Chairman Jay Clayton said in a statement Friday.

In an SEC filing on Friday, the Cheesecake Factory said it "fully cooperated with the SEC in connection with the settlement."

--Updated at 11:16 a.m.